By: Staff Writer
August 30, Colombo (LNW): Sri Lanka’s decision to reopen the Mannar Basin to international petroleum exploration could become one of the country’s most important economic bets but the history of the basin raises a fundamental question: will this licensing round finally turn discoveries into production, or merely restart another cycle of exploration without commercialisation?
The Government has launched the Sri Lanka Licensing Round 2026 (SL2026-01), offering four offshore blocks covering nearly 34,000 square kilometres. The blocks extend across water depths ranging from 100 to 3,000 metres, placing them firmly in the technically demanding deepwater exploration category.
Professor Athula Senaratne has disclosed that two of four exploratory wells drilled in the Mannar Basin encountered gas. A more than 50% success rate compares favourably with the global exploration success rate of only about 10–15%.
The Dorado and Barracuda discoveries made by Cairn Lanka in 2011 provide further evidence. Their combined P50 estimate was 839 BCF of natural gas and 5.88 million barrels of condensate.
Wider assessments have been even more ambitious, indicating potential resources of up to nine trillion cubic feet of gas and one to five billion barrels of oil.
But Sri Lanka must avoid confusing resources with revenue
The opportunity is supported by something many frontier petroleum projects lack: previous discoveries.
Cairn Lanka’s four-well drilling campaign in Block M2 in 2011 produced two significant discoveries. Dorado was estimated to contain 314 BCF of natural gas, while Barracuda contained approximately 525 BCF. Together, they established an estimated 839 BCF of gas and 5.88 million barrels of condensate.
Nevertheless the discoveries never became a commercial production story.That failure is the most important economic lesson for the new licensing round.
When Cairn exited Sri Lanka in 2015, the company was operating in an environment transformed by the global oil-price collapse. Crude prices fell below US$40 per barrel, forcing international oil companies to cut exploration expenditure and abandon high-risk frontier projects.
But global prices were only part of Sri Lanka’s problem.
The country lacked the infrastructure necessary to bring discovered gas into the domestic economy. There was no commercial natural-gas distribution grid, adequate pipeline network or mature LNG regulatory framework. A resource beneath the seabed therefore remained fundamentally different from an economically usable energy supply.
The current licensing round attempts to address the exploration side of the equation. From September 1, international bidders will receive access to reprocessed vintage 2D and 3D seismic data and historical well information. Better data can reduce geological uncertainty and improve the commercial attractiveness of the blocks.
But data cannot eliminate development risk.
The Government is seeking operators with deepwater technical expertise, substantial financial capacity and strong environmental credentials. That requirement itself demonstrates the scale of the challenge. Offshore exploration requires enormous upfront capital, while commercial success is uncertain.
There is another danger: expectations could run ahead of reality.Regional estimates suggesting as much as 9 trillion cubic feet of natural gas and one to five billion barrels of oil are potentially transformative. But these are broader resource estimates, not proof that such quantities can be economically extracted.
The licensing process is expected to continue through the end of 2026, with bids closing in early 2027. Even after successful awards, seismic work, exploration drilling, appraisal and infrastructure construction could take several years.
Sri Lanka therefore faces a critical policy choice.It must not treat successful licensing as equivalent to successful petroleum development.
The real test will be whether the Government simultaneously creates the infrastructure and market conditions required to monetise discoveries.
Mannar has already demonstrated that Sri Lanka can find hydrocarbons. The unresolved question is whether Sri Lanka can finally make them pay.
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